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Wal-Mart faces criminal probe in bribery scandal

04/24/12 08:40 AMUpdated 08/22/13 04:55 PM

Wal-Mart faces criminal probe in bribery scandal

Associated Press

Over the years, retail behemoth Wal-Mart has been the subject a fair number of controversies, most of which have related to union busting and immigration abuses. But the New York Times’ David Barstow has helped uncover a different kind of scandal, and this one may lead to criminal charges.

In September 2005, a senior Wal-Mart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country.

The former executive gave names, dates and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Wal-Mart de Mexico.

Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark. In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”

Wal-Mart’s lead investigator urged the company to expand its internal investigation to get a better sense of the scope of potential wrongdoing. Wal-Mart instead appears to have ignored this advice – they shut down the probe, kept the revelations hidden from U.S. and Mexican law-enforcement officials at the time, and gave a promotion to the former executive accused of being “the driving force behind years of bribery.”

The Washington Post moves the ball forward today, reporting that the Justice Department launched a criminal probe of Wal-Mart in December, after company executives agreed to voluntarily meet with DOJ officials. What’s more, Reps. Elijah Cummings (D-Md.) and Henry Waxman (D-Calif.) have requested a meeting with Wal-Mart CEO Michael Duke to discuss the allegations, though it’s unclear if congressional Republicans will allow any hearings on the matter.

Wal-Mart has made an effort to clean up its image in recent years. It’s probably fair to characterize this as a rather dramatic setback.

Just as a kicker, it’s also worth noting that Wal-Mart and the U.S. Chamber of Commerce have been lobbying to weaken the U.S. Foreign Corrupt Practices Act – the law that prohibits American companies from giving bribes to foreign officials.